- According to news reports, Malaysia will be launching a national standard for palm oil producers next year.

- Plantation Industries and Commodities Minister Datuk Seri Douglas Uggah Embas said that the Malaysian Sustainable Palm Oil (MSPO) is in the final stages of development. MSPO would set the criteria for the certification of Malaysian palm oil players.

- It is pending the approval of the Department of Standards.

- The minister added that the government will ensure that the MSPO is accepted by the American, European, Australian, Japanese, Korean, China and Indian markets. He also said that the MSPO standard will be voluntary initially but the government wants it to be adopted by all Malaysian palm oil players eventually.

- The current certification for palm oil i.e. RSPO (Roundtable for Sustainable Palm Oil) has several disadvantages and certain conditions are “too stringent”. The premium for RSPO is also minimal.

- We are neutral on the move by the Malaysian government. We believe that companies with RSPO certification would not face any problem being certified by MSPO as most of the principles and criteria are the same.

- Most plantation companies in Malaysia are also compliant with RSPO guidelines although they may not be certified by RSPO.

- The issue is the length of the certification process as it might take a long time for the authorities to certify the operations of all of the Malaysian planters. This is due to a lack of manpower and experience.

- Malaysian planters with RSPO certification include Kuala Lumpur Kepong (KLK) and IOI Corporation. As at end-September 2012, KLK’s entire unit in Sabah have been RSPO certified. As at end-June 2012, all of IOI’s mills and estates in Peninsular Malaysia and four mills in East Malaysia had been certified by RSPO.

- It appears that RSPO is losing some traction as Malaysia and Indonesia, which are the two largest palm oil producers in the world, are setting up their respective certification boards.

- Indonesia’s standards are called ISPO (Indonesian Sustainable Palm Oil). They are currently in the process of being implemented. Some Malaysian plantation companies with operations in Indonesia are presently working towards being certified by ISPO.

Source: AmeSecurities